May 14, 2013

Long thought of as a company that serves the needs of Wall Street firms, Bloomberg L.P. is quietly becoming more like them, expanding recently into businesses that have been the domain of the largest banks.

This relatively unheralded expansion by Bloomberg helps explain Wall Street’s consternation at recent disclosures that some customer data was freely available to reporters and others inside the company. The fear inside banks is that Bloomberg could use that data not only to write negative reports but also to become a better competitor.

In recent years, Bloomberg has offered new ways to trade stocks, bonds and more complicated financial products, potentially taking revenue from subscribers to the ubiquitous Bloomberg desktop terminals, which contain a vast store of market data. The expansion is even leading Bloomberg to offer traditional Wall Street services like wealth management and research.

Here's a trading rule that would have been a moneymaker for most of the last generation: Watch what stocks the Goldman Sachs guys keep looking up on their Bloomberg Terminals and buy those. Watch what stocks the Citi guys keep looking up and sell those. Oh, and keep an eye on what the boys at Berkshire Hathaway are looking up for Warren and Charlie.

... Bloomberg executives apologized after Goldman Sachs and other banks complained that Bloomberg’s journalists were able to gain access to information about when customers logged in and what functions they were using.

Journalists are nobodies.

People close to the company said Tuesday that the same data had been accessible to employees in its trading division, known as Bloomberg Tradebook,

Uh-oh. Traders aren't nobodies.

but that the company had cut off that access recently.

So, nothing to worry about.

In fact, better not offend Bloomberg by worrying in public at all. Don't let anybody connect your name to your worries. After all, it's not like the owner of Bloomberg controls a 43,000-man armed and badged security force known as the NYPD. It's not like the Oscar-winning documentary Inside Job didn't lay out an entire strategy for how a police and prosecutorial force could put top Wall Streeters in jail: arrest call girls for cocaine possession, get them to roll over in return for suspended sentences on clients who are traders at the targeted firm, then get the traders to roll over on the bosses by spilling the dirt on high-level financial shenanigans. (Of course, people whom Wall Street doesn't like, such as Elliot Spitzer, Julian Assange, and Dominque Strauss-Kahn, seem to get arrested in sex scandals themselves a lot.)

The criticism of Bloomberg has been caused in part by Wall Street’s desire to push down the steep $20,000 yearly price tag for a Bloomberg terminal. Many bankers say they have little choice but to pay if they want to communicate with their customers, most of whom are on Bloomberg’s communication networks.

Remember what I said about how in Econ 101 they tell you about the virtues of "perfect competition" using the example of a wheat farmer in South Dakota? Well, you don't want to be a wheat farmer in South Dakota. You want to be Michael Bloomberg, monopolizing the provision of technologically simple digital services to the world's richest customers.

Mr. Tierney has helped Tradebook win a greater market share in stocks and options and has developed new products. Last fall, it introduced Bloomberg Pool, which serves as a competitor to Wall Street’s dark pools, where stock trades are executed away from the public exchanges.

Okay, that should be the title of director J.C. Chandor's follow up to Margin Call. He should call his next Wall Street movie Dark Pool. I don't know what Dark Pool means, but I'd go see it.

The funny thing about Wall Street guys are that they have so much testosterone-driven arrogance that they love using sinister sounding names -- "dark pool" -- for whatever it is they are trying to put over on the rest of us. The unfunny thing is that the rest of us are so scared of the Wall Street guys that we let them rub our noses in it like this.

Like other Wall Street firms, Bloomberg has not been afraid to resort to legal muscle to protect its swaps business. It has hired a top Washington lawyer, Eugene Scalia, to challenge rules for the swaps exchanges that were proposed by the Commodity Futures Trading Commission.

Scalia ... That name rings a bell. I've heard the name "Scalia" before in legal contexts. Oh ... Eugene Scalia is Antonin Scalia's son.

33 comments:

Anonymous
said...

Here's a trading rule that would have been a moneymaker for most of the last generation: Watch what stocks the Goldman Sachs guys keep looking up on their Bloomberg Terminals and buy those. Watch what stocks the Citi guys keep looking up and sell those. Oh, and keep an eye on what the boys at Berkshire Hathaway are looking up for Warren and Charlie.

You wouldn't have even had to "pick the right horse" so to speak. You could have just looked at what the biggest players in general were looking at and front-run those.

The secretive Bilderberg Group is currently undergoing a major transformation that will see it and other high profile networks merge under the banner of Google as the elite accelerates its plan to consolidate its technocratic agenda.

"The criticism of Bloomberg has been caused in part by Wall Street’s desire to push down the steep $20,000 yearly price tag for a Bloomberg terminal."

Well my criticism of Wall Street is that they should have to put up adequate margin on these goofy derivative trades so that the taxpayer doesn't have to bail them out. A $20k Bloomie terminal is peanuts compared to that.

There are dark pools within firms. Over a decade ago I worked for the HQ of a famous broker-dealer which had at least one "black hole account." This black hole was a general ledger account where brokers' trails mistakenly accumulated, unpaid. Money had lain untouched in it for years. No one on our floor had visibility to it, but scuttlebutt said that this account was actually dedicated to this strange mistake and that it held not millions, but hundreds of millions of dollars. Occasionally there would be a broker who discovered the discrepancies in his compensation and called HQ, whereupon the firm did a swift calculation and paid him. (In actual practice, the firm paid any amount the broker could paper-napkin, especially if he threatened to call other brokers. None ever followed though on that threat: swift payment scotched it.) Was the black hole finally repaired? The firm told me it was working on it when I left.

Ironically enough, during my orientation, the head honcho had mentioned several defunct broker-dealers and remarked, "They've gone away because they were dishonest. We won't play that way. We aren't going anywhere." In 2008, they went away.

(Good rule of thumb: anyone who makes an unsolicited profession of honesty is a crook. The worst of these professions is the phrase "I'm / we're not evil." If you hear that one, it's time to run.)

Bloomberg likes to fuss about how much soda people drink and how much salt they put on their food. Is that so that the press will continue to present him as the overbearing nanny rather than the James Bond villain trying to take over the world?

Also, is his hyper-opposition to firearms ownership because he suspects that if he keeps grabbing power, eventually the peasants are going to storm the castle and he'd rather they be armed with pitchforks than AR-15s?

I'm not a heavy Bloomberg user, but the reason they're useful is the data you can retrieve. In a few keystrokes you can pull all the upcoming corporate actions for a stock. Get a screen that walks you through valuing an option contract. And build a spreadsheet with custom calculations that will update in real-time. And a thousand other things. So you shouldn't think it's trivial or an extravagant waste of money.Certainly there is a status aspect to it. If you rate your own Bloomberg terminal that has a certain BSD angle to it, no doubt.

I read someplace (here? LOTB?) that the reason Wall Street still exists as a physical place and not in cyberspace is because insider trading, like all organized crime, requires face to face contact free from electronic surveillance, and Wall Street is based on insider trading. This Vanity Fair article seems to confirm that-

"The funny thing about Wall Street guys are that they have so much testosterone-driven arrogance that they love using sinister sounding names -- "dark pool" -- for whatever it is they are trying to put over on the rest of us. "

Dark pools have absolutely nothing to do with "putting one over on the rest of us." Dark pools are way for large hedge funds who take long fundamental positions to hide their trading activity from small high frequency and quant traders.

The funny thing is the "man on the street" is so afraid that Wall Street's trying to screw him over that they don't realize the vast majority of Wall Street's effort is going into screwing over each other. The man on street simply isn't that valuable.

Just look at this story. It's mostly about Bloomberg vs. Goldman Sachs. The classic dark pool story is SAC Capital hiding their highly informative trades driven by quasi-insider activity from quant firms like Renaissance Technologies. It frankly doesn't matter to the common man.

Even stories like Margin Call, or the real life structured credit meltdown had to do with complex institutional products losing value. How many Joe Sixpacks have their investments allocated in CDO-squareds, CLOs, ABS or CPDOs?

If you don't want to be "ripped off" by Wall Street you don't have to. Simply stop interacting with Wall Street. If you put your money into a simple buy and hold index fund with low fees then no one will be getting your money by you. If you buy standard 20% down fixed rate 30 year mortgages then you know exactly what you're getting into.

If you view Wall Street as a giant casino, then it's not really any skin off your back. Simply don't visit the casino.

If you don't want to be "ripped off" by Wall Street you don't have to. Simply stop interacting with Wall Street. If you put your money into a simple buy and hold index fund with low fees then no one will be getting your money by you. If you buy standard 20% down fixed rate 30 year mortgages then you know exactly what you're getting into.

If you view Wall Street as a giant casino, then it's not really any skin off your back. Simply don't visit the casino.

This analogy is wrong because a casino's externalities are rather trivial compared to Wall Street's externalities.

And it doesn't matter if you never visit a casino because a casino still has externalities on the environment. You need borders - physical, legal, political, cultural, etc. borders between yourself and the casino. It's the same with Wall Street - it has externalities on the environment. It doesn't matter if you never deal with Wall Street or put your money there. It has externalities.

Wall Street receives bailouts from the public. And when financial assets rise in value, Wall Street's relative wealth and power rise, which has effects on the "man on the street".

Also, last time I checked Wall Streeters and their sons haven't been volunteering their lives for the military defense of Wall Street and global trade and capital flows so that Wall Street can play global casino.

Wall Street receives bailouts from the public. And when financial assets rise in value, Wall Street's relative wealth and power rise, which has effects on the "man on the street".

Every single cent of these "bailouts" has been payed back, plus much more at high interest rates too. TARP was money far better spent than the vast majority of the dubious "stimulus" projects that consisted of bridges to nowhere.

On top of all that federal government got far more favorable terms than the private creditors' of the banks. If anything the banks, and their investors, "bailed out" the government.

The federal government should be thanking the banks for giving them such a good investment. If only the rest of the federal budget could be invested so well.

Also, last time I checked Wall Streeters and their sons haven't been volunteering their lives for the military defense of Wall Street and global trade and capital flows so that Wall Street can play global casino.

Newsflash: Maybe you've heard of these things called predator drones. Throw in cruise missiles and ICBMs. The military hardly needs any people for actual defense.

The vast majority of military personnel are either "spreading democracy" in the Middle East or red state welfare in military bases that prop up otherwise depressed backwater towns and regions.

The former has nothing to do with helping the global financial system. Last time I checked Baghdad and Kabul haven't exactly turned into financial hubs.

As for the latter if you think military bases in the middle of Oklahoma are actually necessary for the national defense you're sadly mistaken. No country's going to face down the largest nuclear arsenal in the world with second strike capability and advanced missile defense systems, but hesitate because of army bases in rural Alabama.

All we need to do to maintain our military power is maintain our drones and missiles and we're untouchable. It's insane or ignore to believe a modern world war is going to be decided by boots on the ground.

The thing that's needed for American military prowess is thus capital, not people. And Wall Street's preeminence as the most important financial center in the world assures of loads of abundant capital.

Frankly America's leading financial industry is one of the most important lines of defense we have in this country. In case of a future major war with a rising super-power like China, global capital flows would almost all coalesce in dollar-denominated American assets. Just like we've seen in every flight to quality that accompanies an international crisis.

Wall Street would assure that America could finance any future war far longer and more reliably than any potential enemy.

I frankly don't expect many of the more economically ignorant commenters here to understand this point. So let me illustrate with basic history. Consider all of the major global conflicts of past 200 years: the Cold War, WWII, WWI, the Crimean War, the American Civil War and the Napoleonic Wars. The side with the larger and more developed financial system has always won.

You can drone on and on about the sacrifice of soldiers, but the reality is at the end of the day Rothschild's bank was more powerful than Napoleon's armies.

Yeah, the Borg were scary when Next Generation came out, but these days people would love to be Borg. They're already always sticking electronic things in their heads. As Borg they'd get the new updates automatically.

In a few keystrokes you can pull all the upcoming corporate actions for a stock. Get a screen that walks you through valuing an option contract. And build a spreadsheet with custom calculations that will update in real-time.

"If you don't want to be "ripped off" by Wall Street you don't have to. Simply stop interacting with Wall Street"

All right. I hereby declare that Wall Street may no longer manage its portfolio so that its assets are implicitly or explicitly guaranteed by the US printing press and my taxes thus allowing them to create securities that are equivalent to US dollars in all but name, devaluing my dollars in the process and driving up the cost of capital and anything purchased with loans so that I can't save without for the future without some Wall Street intermediary and I can't fund my life with my cash flow like a civilized human being but am in permanent debt to some bank somewhere.

Also, I declare that I no longer am effected by recessions, or the destruction of mass culture from the great American middle brow to the great American teenage temper tantrum thanks to Wall Streets control of the media. Also, next time Wall Street wants to fight a war because it owns the debt of one side or something, my family would like to continue to live in a world where that didn't happen.

It's technically feasible, but Bloomberg has a 30 year lead on you, and I'm sure if you ever became even moderately successful you would start running into all sorts of licensing issues with content providers who wouldn't want you bleeding the Bloomberg cash cow too heavily.

""""DR said - Every single cent of these "bailouts" has been payed back, ."""

Yeah it was paid back from the profits in being able to borrow money at 0% from the FED and then turning around and lending it back at higher interest. Anyone can make money doing that, but not everyone gets that opportunity.

""""plus much more at high interest rates too."''

Right, when did 0% interest become high interest rates, they should have been charged payday loan rates, and forced to turn over their car title to get that. They were broke and leveraged up to their eyeballs.

DR is an excellent example of homo-economicus: a Wall-Street parasite himself, he often shows up here to defend the dishonest, greedy, and occasionaly criminal escapades of the financial sector from the criticisms of people who, unlike him and his cronies, are not amoral predators. I suppose that if white-slavery and organizing bum-fights paid better, DR would be doing that instead.

DR: The cost to the public of the Federal Reserve system, in currency depreciation and generation of boom-and-bust, dwarfs TARP, and the Fed is run for Wall Street, pure and simple. Government subsidy of Wall Street, not Wall Street itself, is a huge net cost to the taxpayer. Also, I like how you mention war and high finance without mentioning the role "the Street" plays in lobbying for war. Deficit military spending=another forced income transfer to Wall Street.

Newsflash: Maybe you've heard of these things called predator drones. Throw in cruise missiles and ICBMs. The military hardly needs any people for actual defense.

Newsflash: Maybe you've heard of these things called suitcase nukes. Thrown in bioweapons. The military can't defend human packed urban centers from suitcase nukes and viruses with predator drones and ICBMs.

As for the latter if you think military bases in the middle of Oklahoma are actually necessary for the national defense you're sadly mistaken. No country's going to face down the largest nuclear arsenal in the world with second strike capability and advanced missile defense systems, but hesitate because of army bases in rural Alabama.

Where do you think ICBMs and US military equipment are? In tunnels under Manhattan? If the rest of the US seceded from Wall Street, do you think Wall Street would be able to defend itself? It probably wouldn't be able to defend itself from Chechen youths with pressure cookers.

Frankly America's leading financial industry is one of the most important lines of defense we have in this country. In case of a future major war with a rising super-power like China, global capital flows would almost all coalesce in dollar-denominated American assets. Just like we've seen in every flight to quality that accompanies an international crisis.

Global capital flows from Europe and parts of East Asia would coalesce there because of US military power. Most of these places have US military bases in or near them. If the Chinese military was occupying those areas, do you think that would happen?

You can drone on and on about the sacrifice of soldiers, but the reality is at the end of the day Rothschild's bank was more powerful than Napoleon's armies.

At the end of the day, Rothschild's bank depended on the lives of military and police forces to defend itself, its assets, its personnel.

Newsflash: Maybe you've heard of these things called predator drones. Throw in cruise missiles and ICBMs. The military hardly needs any people for actual defense."

When it comes to anything other than counting money, you don't seem to know much. Drones are primarily used for KBP (Killing Brown People) - not for actual defense. ICBMs (and to a lesser extent nuclear tipped cruise missiles) are far more important to the actual defense of the nation. And, as another commenter pointed out, they are mostly based in fly-over land

Steve, new information is coming out that Bloomberg was accessing the terminals of Bernanke and Geithner. That would have been information that could lead to large profits due to QE frontrunning as well as who would be bailed out and for how much. I thought spying on the government was punishable.

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